Correlation Between Simt High and Vanguard Developed

Can any of the company-specific risk be diversified away by investing in both Simt High and Vanguard Developed at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Simt High and Vanguard Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Simt High Yield and Vanguard Developed Markets, you can compare the effects of market volatilities on Simt High and Vanguard Developed and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Simt High with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simt High and Vanguard Developed.

Diversification Opportunities for Simt High and Vanguard Developed

0.28

Correlation Coefficient

Simt High  Vanguard Developed

Modest diversification

The 3 months correlation between Simt and Vanguard is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Simt High Yield and Vanguard Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Developed and Simt High is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Simt High Yield are associated (or correlated) with Vanguard Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Developed has no effect on the direction of Simt High i.e., Simt High and Vanguard Developed go up and down completely randomly.

Pair Corralation between Simt High and Vanguard Developed

Assuming the 90 days horizon Simt High Yield is expected to generate 0.25 times more return on investment than Vanguard Developed. However, Simt High Yield is 3.99 times less risky than Vanguard Developed. It trades about -0.21 of its potential returns per unit of risk. Vanguard Developed Markets is currently generating about -0.3 per unit of risk. If you would invest  521.00  in Simt High Yield on October 9, 2024 and sell it today you would lose (4.00) from holding Simt High Yield or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Simt High Yield  vs.  Vanguard Developed Markets

Simt High Yield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Simt High Yield are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Developed Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Simt High and Vanguard Developed

The main advantage of trading using opposite Simt High and Vanguard Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simt High position performs unexpectedly, Vanguard Developed can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Developed will offset losses from the drop in Vanguard Developed's long position.

The idea behind Simt High Yield and Vanguard Developed Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.